An Economist’s Tipping Strategy
I have a friend with whom I regularly eat out at restaurants and from time to time we disagree on how much to tip. Traditionally, I have been a hard-wired 20% tipper. But since studying the racial effects of taxi-cab tipping, I’ve been more attracted to tipping less – sometimes closer to 15%. This has at times created disagreements between my friend and I on how much to tip. He always wants to tip 20%. But when we’ve disagreed, we’ve always resolved the issue by tipping the larger amount. We always split the bill—including the tip—50/50.
But a few weeks ago, my friend and I were eating dinner and experienced exceptionally bad service. The server twice put in the wrong order and charged us for items that we had not ordered. I suggested that we reduce our tip to 10% (I note that while I’m high maintenance in many aspect of my life, I’m not persnickety about restaurant service and the last time I reduced my tip to 10% was probably more than 1000 restaurant meals ago). My friend agreed that the server had made these errors (and indeed, the sever himself acknowledged that the service was subpar), Nevertheless, my friend still wanted us to leave a 20% tip. Read More »
Latest Posts
Fighting Over the Width of Airline Seats
Airbus this week called for an industry standard that would provide for a seat at least 18 inches wide in economy cabins, but its U.S. arch-rival Boeing says it should be for airlines to decide.
As you can imagine, there is a lot of money at stake here:
Boeing says its revamped “777X” will hold 406 people based on economy seats over 17 inches wide and set out 10 in each row.
Airbus says the competing version of its A350 will carry 350 people in 18-inch-wide economy seat laid out 9 abreast.
But it’s more than a battle between two companies. It’s a battle between the past and the present: Read More »
What Do You Want to Know About Fighting Poverty With Cash Payments?
If you happen to be in New York on Mon., Nov. 11, you might want to come see Richard Thaler and Dean Karlan talk about “using evidence and behavioral economics to fight poverty.” The event (info here) is run by the Innovations for Poverty Action, of which Karlan is president. I will moderate the Thaler-Karlan discussion — which means I get to ask them any questions I want about whether and why it is a good idea to fight poverty by giving cash directly to poor people rather than the traditional means of directing aid toward institutions and hoping that it trickles down fruitfully. (There are, of course, more options than just those two.)
In our recent podcast called “Would a Big Bucket of Cash Really Change Your Life?,” we looked at whether a windfall helps a family across the generations. The short answer, at least in the case of the 19th-century land lottery that we discussed: no. Read More »
With So Much Food, Why Do So Many People Go Hungry?
Writing for Foreign Policy, John Norris explores this question: why does hunger still kill “more people every year than HIV/AIDS, malaria and tuberculosis combined” when one-third of the food produced for human consumption is wasted?
In the developing world, Norris writes, actual consumers waste little food:
Instead, much more of the food waste in the developing world comes further upstream in the production process.
Crops are inefficiently farmed with outdated tools, and often harvested early because farmers are under economic and climactic duress. To get meat, fruits, vegetables and fish to market in the developing world often means navigating lousy roads, using warehouses without proper refrigeration, facing greater vulnerability to pests, and any number of other factors that drive up spoilage and losses. A gallon of milk doesn’t last nearly as long when it is transported in a can that ends up sitting in the hot sun under a banana leaf.
It’s a different picture in the developed world: Read More »
The Cheater’s High
A new paper in the Journal of Personality and Social Psychology (abstract; PDF) explores “the cheater’s high.” The authors are Nicole Ruedy, Celia Moore, Francesca Gino, and Maurice E. Schweitzer. Here’s the abstract:
Read More »Many theories of moral behavior assume that unethical behavior triggers negative affect. In this article, we challenge this assumption and demonstrate that unethical behavior can trigger positive affect, which we term a “cheater’s high.” Across 6 studies, we find that even though individuals predict they will feel guilty and have increased levels of negative affect after engaging in unethical behavior (Studies 1a and 1b), individuals who cheat on different problem-solving tasks consistently experience more positive affect than those who do not (Studies 2-5). We find that this heightened positive affect does not depend on self-selection (Studies 3 and 4), and it is not due to the accrual of undeserved financial rewards (Study 4). Cheating is associated with feelings of self-satisfaction, and the boost in positive affect from cheating persists even when prospects for self-deception about unethical behavior are reduced (Study 5). Our results have important implications for models of ethical decision making, moral behavior, and self-regulatory theory.
How Does the Economy Actually Work? Ray Dalio Explains
Ray Dalio is the founder of Bridgewater Associates, known to some as “the world’s richest and strangest hedge fund.” He has appeared on this blog before, talking about the upsides of negative feedback. Now Dalio has put together a beguiling 30-minute video that tries to explain how the U.S. economy actually works. Don’t be ashamed if you find out a lot you didn’t know — as Dalio makes clear, most policy makers don’t know much about the economy either. Read More »
Are We Heading Toward a Reinsurance Bubble?
As a topic, “shadow insurance” may have a certain MEGO quality — that’s “My Eyes Glaze Over” — but a new paper called “Shadow Insurance” (abstract; PDF) by Ralph S.J. Koijen and Motohiro Yogo is well worth a look:
Read More »Life insurance and annuity liabilities of U.S. life insurers were $4,068 billion in 2012, which is substantial even when compared to $6,979 billion in savings deposits for U.S. depository institutions (Board of Governors of the Federal Reserve System 2013). However, there is little research on life insurer liabilities, especially in comparison to the large banking literature. The reason, perhaps, is the traditional view that life insurer liabilities are safe (and boring) because they are more predictable, longer maturity, and less vulnerable to runs. Hence, all of the interesting action is on the asset side, where life insurers take on some investment risk. This paper shows that developments in the life insurance industry over the last decade shatters this traditional view. As a consequence of changes in regulation, life insurers are now using reinsurance to move liabilities from operating companies that sell policies to less regulated and unrated shadow reinsurers. These shadow reinsurers are captives or special purpose vehicles in U.S. states (e.g., South Carolina and Vermont) or offshore domiciles (e.g., Bermuda, Barbados, and the Cayman Islands) with more favorable capital regulation or tax laws. In contrast to traditional reinsurance with third-party reinsurers, there is no risk transfer in these transactions because the liabilities stay within the same holding company.
Question of the Day: Why Don’t Companies Advertise on Homeless People?
Callum Linley, an 18-year-old reader from Melbourne, Australia, writes to say:
So why aren’t there companies lining up to advertise on homeless people?
My guess is it’s an image problem – not wanting to be associated with the “failure” of being homeless. But wouldn’t that be compensated by the fact you could put forward the idea that you are a socially responsible and sympathetic company who cares for the less fortunate?
Well, the world already has given us Bumvertising and homeless people as wi-fi hotspots, and I wouldn’t be surprised if homeless advertising has shown up on TV (hey Simpsons and Family Guy and South Park fans etc., let us know). But how would you answer Callum’s question? Does it fall into the category of:
a) Questions that are so obvious that they don’t need an answer; or
b) Questions that should be asked more often, but aren’t; or
c) Something else entirely.
What the President Does — and, Importantly, Doesn’t — Do
Between the N.S.A./Merkel mess and the ObamaCare mess, it seems a good time to ask a question we’ve asked in the past: just how much does the President of the United States really matter? Our original podcast on the topic came out in 2010; we overhauled the episode in 2012, adding interviews with Donald Rumsfeld and Austan Goolsbee.
As Jon Stewart puts it so well in the video below, if the President is out of the loop on Merkel eavesdropping and his namesake healthcare law, just what loops is he in? I do not mean to cast aspersions on President Obama himself (although you are free to cast away). I mean to highlight the possibility that we assign way too much weight to the role of the President generally.
What are the odds that you agree with my argument? Who knows. What are the odds that, even if you do agree, you will disagree once it’s time to elect the next President, and we get caught up once again in our Great Man Theory of Voting? Read More »
More Predictions, From Bad to Worse
Our “Folly of Prediction” podcast made these basic points:
Fact: Human beings love to predict the future.
Fact: Human beings are not very good at predicting the future.
Fact: Because the incentives to predict are quite imperfect — bad predictions are rarely punished — this situation is unlikely to change.
A couple of recent cases in point:
The National Oceanic and Atmospheric Administration predicted a particularly bad Atlantic hurricane season this year but, thankfully, were wrong, as noted by Dan Amira in New York magazine. It is hard to imagine that many people are unhappy about that.
Here, as noted by Ira Stoll in the New York Sun, are the picks by ESPN experts at the start of the 2013 baseball season. How bad were their picks? Read More »
In Praise of Smaller Schools
We are in the midst of a nationwide search for a single magic bullet in education. But the more evidence that is gathered, the more obvious it becomes that no such single magic bullet exists.
That said, a new study (abstract; PDF) on school size — not class size, but school size — is worth a look. Here’s the abstract; I have bolded the most relevant conclusions:
Read More »One of the most wide-ranging reforms in public education in the last decade has been the reorganization of large comprehensive high schools into small schools with roughly 100 students per grade. We use assignment lotteries embedded in New York City’s high school match to estimate the effects of attendance at a new small high school on student achievement. More than 150 unselective small high schools created between 2002 and 2008 have enhanced autonomy, but operate within-district with traditional public school teachers, principals, and collectively-bargained work rules. Lottery estimates show positive score gains in Mathematics, English, Science, and History, more credit accumulation, and higher graduation rates. Small school attendance causes a substantial increase in college enrollment, with a marked shift to CUNY institutions. Students are also less likely to require remediation in reading and writing when at college. Detailed school surveys indicate that students at small schools are more engaged and closely monitored, despite fewer course offerings and activities. Teachers report greater feedback, increased safety, and improved collaboration. The results show that school size is an important factor in education production and highlight the potential for within-district reform strategies to substantially improve student achievement.
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. He's employed as a historian at Texas State University and lives in Austin, Texas. 
. His research focuses on intellectual property and international affairs. 
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